Former officials urge court to rehear Pentagon's supply-chain risk ruling against Anthropic

The fallout from a failed partnership

The relationship between the Department of Defense (DOD) and Anthropic, a leading AI developer, has shifted from a premier partnership to a legal battle. Between 2024 and mid-2025, Anthropic’s Claude model was the first frontier AI—a model with advanced capabilities—to be deployed within highly restricted, classified government networks.

That alignment shattered in early 2026. The Pentagon sought permission to deploy commercial AI models for 'all lawful use cases' without any limitations. Anthropic leadership refused to agree to these terms, specifically citing concerns over the government using its technology for mass domestic surveillance or for autonomous weapons systems that can attack targets without human oversight.

In response to these failed negotiations, Defense Secretary Pete Hegseth officially designated Anthropic as a 'supply-chain risk to national security.' This is a severe regulatory label usually reserved for foreign adversaries. It effectively bars defense contractors and other components from doing commercial business with the company.

A legal battle over retaliation

Anthropic sued the federal government, leading to a series of conflicting court decisions. A federal judge in San Francisco initially ruled in favor of Anthropic, describing the Pentagon's actions as retaliatory. However, the U.S. Court of Appeals for the D.C. Circuit later ruled 2-to-1 in favor of the Pentagon in a separate challenge.

The new legal brief, filed by a bipartisan group of 17 former senior officials, argues that the D.C. Circuit's decision is now the governing law nationwide. The group includes high-profile figures such as former Director of National Intelligence Avril Haines and former National Security Advisor Susan Rice. They argue that the court must rehear the case because the ruling establishes how the DOD can deal with every defense contractor moving forward.

The officials contend that the Pentagon's move was 'pretextual.' They point out that the DOD announced the penalty and public denunciations on social media before completing any formal administrative steps or providing a clear justification. They argue the designation was essentially an unconstitutional warning to other AI makers who might refuse to meet government demands.

Setting a precedent for the industry

The core of the officials' argument is that the current ruling validates a 'sham process.' They argue that if the decision stands, it gives future administrations the power to punish any company that falls out of favor with the government, regardless of whether a legitimate security risk exists.

The brief highlights that the DOD has not explained why it would need the first capability Anthropic refused—mass domestic surveillance—nor has it reconciled the second capability, lethal autonomous weapons, with international laws. The experts argue that by failing to engage in a lawful process, the DOD is creating a dangerous standard for supply-chain risk designations.

The group of experts, who have spent decades in federal procurement and intelligence, warns that the ruling threatens the technological edge of the United States. They believe that by allowing the government to use security labels as a tool for policy enforcement, the court is weakening national security and creating a roadmap for government overreach against private industry.

What comes next for AI policy

The Pentagon has not yet provided a comment on the new brief. The outcome of this legal fight will likely dictate the boundaries of how private AI companies interact with the military. If the court refuses to rehear the case, the 'supply-chain risk' designation may become a standard tool for the government to shape the behavior of frontier AI developers.

For the broader tech industry, this case serves as a warning. It highlights the tension between government desires for unrestricted access to powerful AI and the corporate desire to maintain safety guardrails and ethical boundaries. The resolution will clarify whether companies can legally refuse certain government requests without facing severe regulatory penalties.

The role of the D.C. Circuit

Because Congress gave the D.C. Circuit exclusive jurisdiction over supply-chain risk designations, the panel's decision is final for the entire country. The 17 officials argue that because the stakes are so high, the court should rehear the case en banc—a process where all judges on the court hear the case together rather than a smaller panel.

They argue that the decision is of 'exceptional importance' because it sets the rules for the entire defense industrial base. If the court maintains its current stance, it confirms that the DOD has the authority to use security designations to manage commercial relationships, potentially impacting every company that provides software or hardware to the military.